If you’re like most people, you’re not rich and you don’t have an estate plan. If you don’t have a fat portfolio of assets to leave to your loved ones, why would you need one? Maybe because an estate plan can do far more than transfer assets.
It’s true that most people equate wills and estate plans, but they’re not the same. The confusion may be part of the reason only 40% of American adults have estate plans. Yet the more you learn, the more likely you are to start planning, and that may be why more than 80% of older Americans have taken the effort.
Five ways an estate plan can help you and your family
Let’s back up for a second. The truth is that everyone has an estate plan. It’s just that, as we mentioned in an earlier post, it may not be a very good one. If you die without a will, your estate will be distributed according to United Kingdom’s laws for intestate succession. So, the real question is: How can you improve upon the state’s plan for your estate?
Here are some of the ways an estate plan can help you and your family:
- Anticipate difficult medical situations. Many people know how they’d want to be treated if they were ever on life support or suffering from dementia. Few take the extra step to make it known. An Advance Health Care Directive grants you control over these situations.
- Resolve legal issues. You can also use your estate plan to grant someone a durable power of attorney so that he or she can take care of your legal issues in the event you are incapable of doing so.
- Keep your family out of probate. Some estates may be small enough they can slip past probate by going through special proceedings, but if you have a home, the odds are you’ll hit the threshold for probate. That could mean long, expensive—and potentially contentious—court proceedings.
- Keep your assets whole. Intestate laws divide everything according to raw percentages. Often the only way your beneficiaries can hit those percentages is by selling the assets they inherit and distributing the money. Creating an estate plan allows you to keep important assets, such as a home, whole and in the family.
- Save money. Sure, you might not have so much use for your money after you’re gone, but the plans you make may help your family. There are legal and tax consequences to all the choices you’ll make with your estate, and good estate plans often save money—and build wealth—in the long run.
Pretty much anyone can benefit from these aspects of estate planning. But you might benefit in other ways, too. Depending on your circumstances, you may want to appoint a guardian for your child, keep a business together, establish a legacy or make sure your pet will end up in a loving home.
What are your goals?
In the end, the best estate plans respond to your goals. They give you a measure of control over situations in which you’d otherwise have no control. And they give you the means to protect your family even when you can’t be there.
Most of us want our families to do well, no matter what happens. Estate plans can help transform those hopes into reality. What do you want?
